It’s hard to imagine any good coming from the phone and pay TV hacking allegations swirling around Rupert Murdoch’s
News Corp
.

For a large contingent of investors the scandal has put News Corp beyond the pale.

Even so, by putting
Rupert Murdoch
on a tighter leash, and reducing the chance he will pass the CEO’s role to his son
James
, the scandal may have removed at least two of the negatives surrounding the company, says Wells Fargo Securities media and cable analyst Marci Ryvicker.

“What this scandal has done is two things,” Ms Ryvicker told The Australian Financial Review.

“It has put Rupert Murdoch in check, meaning he can’t just go out and buy whatever he wants. He has been known as an empire builder, and he kind of has an ‘X’ on his back where he can’t do that. So from a shareholder perspective this is forcing him to be more disciplined.”

“[Second,] there’s the thought that James Murdoch will not be the successor to Rupert Murdoch, and that successorship may go to
Chase Carey
due to the scandal. And Chase Carey has a fantastic reputation as an operator who is able to monetise whatever asset he has, whether it was at DirecTV, or now at News Corp.

“So those two positives from this are something that I think is at least holding the stock up.”

The scandal has not taken the same toll on the media giant’s sharemarket value as it has on its public image.

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News Corp’s shares have kept pace with the tech-oriented Nasdaq index – where it is listed – over the past year. That takes in the re-eruption of the phone hacking scandal last July, after it emerged that reporters and investigators at the now-defunct News of the World had hacked into the voice messages of murdered teenager Milly Dowler.

The company’s shares rose about 3 per cent from Tuesday to Thursday last week as James and Rupert Murdoch gave evidence to the Leveson inquiry into media standards in Britain.

Like the parliamentary inquiry last year that culminated in a comedian throwing a pie in Rupert’s face, the Leveson inquiry failed to elicit seriously damaging new admissions from either Murdoch, despite having a top silk to ask the questions instead of MPs.

Matthew Harrigan, media analyst at Wunderlich Securities, said: “From what I’ve seen of the summaries of the testimony, [Rupert Murdoch] really didn’t do anything that would put him at risk. I don’t feel like there’s anything here that’s going to force any changes at the top with Rupert.”

James Murdoch has relinquished the chairmanship of News International, the UK newspaper arm, and his board seat at BSkyB, the UK pay TV arm, and moved back to New York. News Corp has had to abandon plans to buy the outstanding BSkyB shares, probably for a very long time – if not forever – said Mr Harrigan.

Fresh allegations of pay TV-related hacking and cash payments to British police officers have been published in the past month by the Financial Review and the BBC’s Panorama program.

A British lawyer pursuing News Corp on behalf of phone hacking victims, Mark Lewis, has joined forces with a prominent New York civil liberties lawyer, Norman Siegel, to explore the prospects for bringing phone-hacking suits in the US, where damages could be much higher. The Federal Communications Commission is investigating the allegations, along with the Department of Justice and the Securities and Exchange Commission.

Even so, investors and analysts remain sceptical that the scandal will wash up on American shores, where the company’s crown jewels – its Fox News network and other television assets and licences – are.

Ms Ryvicker said: “If you think about the probability of the FCC licences on US soil being taken away from News Corp, that likelihood is probably very, very low. I think it’s only happened on two occasions; they were extreme circumstances that are not anything like what we’re talking about.”

Ms Ryvicker said the FCC would have to have no other choice, because taking News Corp’s broadcast licences away would hurt not just News Corp, but any station group that has a Fox station – in other words, the entire broadcast television industry in America.

“And guess what – that’s what the politicians use to get their stuff out,” she said. “They use the airwaves. I think they’d have to have no other choice if they wanted to disrupt the entire broadcast television industry in the United States.

“As investors, we hear the noise, we read about it everyday, but it’s noise at this point. When you weigh the upside versus the downside, I think that the biggest shocks came last year, and I think that Rupert Murdoch and James Murdoch are being forced to deal with this, and they’re doing everything that they’re supposed to do.

“And the fact that James probably won’t be the successor probably outweighs the probability that there’s going to be an issue with the FCC licences over here.”

Another potential plus is that the scandal increases the likelihood that News Corp will spin off its newspaper business, increasing its growth potential and value, Ms Ryvicker said. Her team values the newspaper business at $US5.4 billion ($5.15 billion), just over 10 per cent of News Corp’s near $US50 billion market value. Spinning it off would leave a faster growing company at every level – revenue, operating income, cash-flow and earnings – and boost the potential value considerably, Ms Ryvicker said.

News Corp US shares now trade at just under $US20, a 20 per cent plus discount to Wells Fargo’s $US24-26 fair valuation that is commonly described as the “Murdoch discount”. Shedding the newspapers raises the valuation to $US27-34 a share.

Don Yacktman, president of Yacktman Funds and one of News Corp’s largest institutional shareholders since the depths of the global financial crisis, said he was not concerned that the US broadcasting licences were at risk.

“A lot of that is an attempt to try to negate what he has accomplished, but I think that would be very difficult for the opponents to do,” Mr Yacktman said.

He focused more on the business side of News Corp than the politics, said Mr Yacktman. He judged the businesses to be in excellent shape and the shares relatively cheap, despite recent increases because of the controversy surrounding the company.

“The part that’s critical for the company at this point is the Fox News cable news station and they have a bigger market share than MSNBC and CNN combined,” Mr Yacktman said. “I think he’s done a great job of finding a niche in the United States that was not being exploited and he’s taken enormous market share from these other people.”

That had made Rupert Murdoch enemies, said Mr Yacktman.

Mr Harrigan said the pay TV hacking allegations against News Corp’s NDS subsidiary had been resolved effectively in News Corp’s favour through a series of court actions.

“Certainly there was some rough malfeasance within News International, and that’s obvious at this point,” Mr Harrigan said. “But everybody who hates Murdoch is trying to dredge up anything that ever could have happened or fantasise about what could have happened.

“But my impression in the United States is that they have tried very actively for a good period of time now to open up and almost encourage the authorities to come in, the FBI and all that, and find anything that was amiss.

“The Holy Grail for the Michael Moores of this world is going after Fox News, and I am not a fan of Fox News. But it doesn’t feel too likely to me that there’s much in the States. The cesspool – and unfortunately that’s really what it is – was really concentrated in News International.”